The World’s First Behavioral Bank
South African insurer Discovery has launched “the world’s first behavioral bank.”
The new digital-only bank will start operating in March 2019, and aims to address financial risk by following the 5-3-80 model of financial health – five controllable behaviors of spending more than we earn, not saving regularly, not having insurance in place, not paying off property and not investing for the long term, which present three key risks of unaffordable debt, exposure to unexpected expenses or loss of income, and insufficient income in retirement – all of which result in 80% of events where individuals are unable to meet their financial obligations. Discovery Bank is also introducing dynamic interest rates that are linked to financial behaviors of customers, enabling them to earn more interest on savings and pay less interest on credit as they improve their financial behavior with Vitality Money.
“In the same way our Shared-Value Insurance model aimed to address the shortcomings of human behaviour and the suboptimal design of insurance systems in life and short-term insurance, our latest adjacency is no different. Our Shared-Value model is highly relevant in the context of banking, and more importantly, in the South African context; given that more South Africans are credit active than employed; 40% struggle to make debt repayments; we have one of the lowest savings rates in the world; and less than 4% of our citizens are adequately prepared for retirement. In addition, consumers today require personalised banking that is transparent, equitable, and controllable. The case for disruption, and the opportunity for Discovery Bank, is therefore clear.” – Founder and CEO of Discovery, Adrian Gore.